China’s grape wine consumption increases sharply, with the import of foreign wine skyrocketing
The consumption of grape wine in China has risen sharply and foreign wine has picked up speed in entering the Chinese market, a market that promises huge potential. This can be attributed to the increase in the per capita income of the Chinese people and a common recognition that grape wine has great health value.
Statistics from the Guangzhou Customs show that Guangdong, China’s biggest importer of grape wine, registers an import of a little more than 1,100,000 liters in 2001. However, after the country’s entry into the WTO, imports climb up year after year. In 2006 alone, Guangdong imports 6,500,000 liters of grape wine.
While domestic wine producers try to take a greater market share through lowered prices, foreign businessmen, on the other hand, are not willing to compromise their prices. In the first two months of this year, the average price of grape wine imported through Guangdong has increased by 13%, among which the price of fresh grape wine has even risen by more than 20%. Producers from France, the United States and Australia continue to be the major suppliers for Guangdong, 86% of whose wine imports are from these three countries.
Currently, the consumption of grape wine accounts for a mere 1% of wines consumed by the Chinese, and the per capita consumption is only 0.35 liter, which is close to the average level of low-income countries in the world. The per capita consumption in urban areas stands at 0.7 liter or so, which is the case with the developing countries, and is only 16% of the world average consumption, which is 4.5 liters. So China’s grape wine industry boasts broad prospect for further development.
Grape wine is not only nutritious and has great health value, but is classical and modern at the same time, and embodies the elements of fashion. That is why it is gaining increasing favor of the Chinese consumers, making itself an eye-catcher in the wine market. In the past five years, the country’s per capita consumption of grape wine has almost doubled. Nevertheless, there is still huge potential in the market waiting to be tapped. As they realize that grape wine is good for health, more and more people begin to embrace it and become loyal customers. As an emerging market for grape wine, China is beginning to display its potential, and grape wine industry is being transformed into a new red hot spot for investment.
In China, 70% of grape wine is sold through the market for ready-to-drink grape wine, among which the majority goes to the four-star or five-star hotels. Up to now, France is the world’s largest wine exporter to China, with an annual export of 750,000 trunks. Australia comes second, selling 200,000 trunks to China on an annual basis. Then come Italy, Spain, the United States and Chile. Among these countries, Spain, Chile and Australia have increasing market shares in China. The others perform not as well, or even begin to lose their shares.
China marches into the rank of the world’s top ten grape wine consumers
As people’s concept of consumption changes, grape wine is beginning to be embraced. According to a newly released report from an authoritative international agency, the production of grape wine in China increases at the same pace with the consumption, which is a 20% increase annually. Since 2005 when China first made its way into the world’s top ten grape wine markets, the country has been staying in the rank. The situation is unlikely to change in the future.
An authoritative international agency on grape wine which is called “the International Expo on Grape Wines and Spirits”/the International Research Institute on Grape Wines and Spirits has recently released its latest report entitled “A Look into the Market of Grape Wines and Spirits in the Year 2010”.
The report suggests that the production and consumption landscape of the world’s grape wine market is in for a subtle change: the dominance of France will be challenged by its strong competitors; China, with its increasing consumption, will draw more attention from foreign wine producers.
One of Asia’s leading grape wine producers, China produces 385 million liters of wine in 2005. The country’s wine consumption in 2005 is up by 13.06% over 2004, reaching a total volume of 423.2 million liters. Thus, China is ranked among the world’s top ten consumers of non alcohol bubble-free grape wine. According to the report, between 2005 and 2010, the country’s grape wine consumption will see an increase of 35.44%. The figure stands at 65.52% in the ten years between 2001 and 2010, which is 6.5 times that of the world’s growth rate.
In spite of that, in terms of profits made from grape wine, China fails to list itself among the top ten. The reason behind it is that the Chinese market is still low-end, for the grape wine that sells best is less than five US dollars per bottle.
The report also suggests that in 2005, 80% of the non alcohol bubble-free grape wine sold in China is red wine. However, between 2001 and 2005, the consumption of white wine which previously accounts for 19% of the total is up by 36.91%, and is expected to grow by 64.57% between 2005 and 2010. Meanwhile, the consumption of pink grape wine which takes up only 1% of the total consumption in 2005 will see a growth rate of 36.59%.
From 2001 to 2010, the turnover of non alcohol bubble-free grape wine will be up by 95.17% to 1.655 billion US dollars from the previous 848 million US dollars.
Problems encountering foreign wine in China
1 Analysis of consumption behavior concerning foreign wine in China
(1) The consumers: it is found that consumers of foreign wine are divided into the following three groups. First, the well-educated high-income earners who are frequently sent for international business exchanges. Second, foreigners who live and work in China. Third, young white-collar workers who take foreign wine as a symbol of fashion and of their identity in various social occasions.
(2) Why choose foreign wine? The first reason is that its high quality is recognized. Besides, it is a good choice in the interaction with foreigners. Second, it is almost a must for foreigners living in China. Third, the young white-collar workers believe that it shows their taste of fashion and regard it as a symbol of their identity.
(3) Where is the market? Bars come the first, then come the four-star and five-star hotels, and international chain supermarkets.
(4) When to purchase and how much? The first two categories of consumers are stable consumers who make their purchases on a regular basis since grape wine is one of their necessities in life. As for the third category of consumers, their purchases are closely related with their social arrangements. Some major western festivals like the Valentine’s Day, Halloween and Christmas become important occasions when young white-collar workers in China buy foreign wine.
(5) Which brands to choose? The brands and producers of grape wine chosen by the first two groups of consumers are diversified. They admire both the class and taste of grape wine of the old world and the vigor and vitality of the new world. Consequently, producers like France, Italy, Spain from the old world and Chile, the Unites States and Australia from the new are the favorites of those who understand the wine. For the third group of consumers, their choices of wine are random, for foreign wine brands have a huge variety and few customers are well-informed about their popularity and reputation. In this case, information provided by shopping guides and promotional activities may influence the buyers’ decisions. Nevertheless, such promotion can be overshadowed by renowned foreign brands which have become household names.
2 As foreign wine enters the Chinese market, what are the problems to be solved?
(1) The change of mindset: it is the dream of foreign wine producers to sell their products to China which has a population of more than one billion people. However, the questions are: How much potential does the market have? What are the expectations of foreign business people towards the Chinese market? What is the market environment in China? All such questions make it clear that for foreign wine to enter China, the most important problem that should be tackled first and foremost is the change of mindset. Although these questions have been discussed before in this article, yet all foreign business people engaged in the wine industry must be able to understand the Chinese market, the consumption mindset of the Chinese public concerning grape wine, and rules of China’s wine market so as to run a successful wine business in China from the local perspective. Or else, when they are asked to pay a big sum of money to the shop owners in order for them to sell their products and when their competitors buy franchise rights at extremely high prices, you will see the puzzled faces of foreign investors. When they are required to put false labels of production year on the wines and when they find the bestselling wines in their home country attract no customers, again, you will see the puzzled expression on their faces.
(2) The choice of talents: Since they’ve decided to run their business in China, the foreign wine producers cannot avoid the choice of talents. Past experiences show that foreign investors are most likely to recruit the Chinese people in Singapore, Malaysia, Hong Kong and Taiwan into their top management circle. In their opinion, these places are blessed with highly developed economies and high-caliber management professionals who speak fluent English which makes them easy to communicate with. Besides, they are Chinese, so their linguistic and cultural backgrounds are similar, which will make it easy for them to operate in the market. However, those foreign investors fail to see the bigger picture. Management professionals from these places have no idea what life in China is like, as a result, they have little understanding of the Chinese market, nor are they informed of the consumption behaviors or consumption habits of the Chinese people. Merely following in the footsteps of the economically developed regions may not lead to desired results. What is most suitable for one place may not be a great fit for another. So the very first step that foreign investors should take is to employ local professionals who have a series of successful experiences behind them in the country’s wine market.
(3) Brand management: What are the average Chinese consumers concerned about? Their top concern as we find on the country’s most reliable website on grape wine is brand, followed by price and quality. From this we can see that in the Chinese market, what’s most important is to make your brand known to the public, which is the first step in persuading them to buy your product. In France, over the years, different regions produce wines of distinctive features, and different wine shops offer wines with their own characteristics. Above all, France boasts a long history of wine-making and private wine shops are everywhere. The French grow up in the flavor of grape wines, so everyone is skilled at appreciating wines. Excellent wine-makers and unique wine-brewing techniques gain the respect of all, including consumers, investors and enterprise owners. As long as you brew great wines, you win the heart of all, even if you run a small family wine shop. That is why advertising is unnecessary for good wines in France. Public praise and quality are all that is needed to gain recognition from consumers. A look at the history of grape wines in China reveals that the market is still at its initial stage after more than twenty years of development. Because grape wine is not in the mainstream culture in China, the majority of consumers are not able to form appraisal criteria in a short time. Consequently, advertising plays an undeserved role in people’s consumption. Moreover, some big domestic wine enterprises believe that the Chinese market is immature, so quality is not a big deal either at present or in the foreseeable future. With such a belief in mind, most manufacturers lay great emphasis on packaging and advertising. So in today’s China, if your wine is as famous as Chivas, Martell, Royal Solute and Remy Martin, then you are guaranteed a bright prospect. Though some of the biggest foreign wine agents in China, such as ASC, Montrose and Summergate, etc, have sales volumes of 100 million, but since they manage more than 1000 brands, the sales of any single brand may not be enough to arouse the interest of foreign business people.
 (4) Channel building: As foreign wine comes to China, local agents have a great role to play. The problem is that currently, local agents target the high-end market in order to reap huge profits. So once a product does not sell well, it is replaced by another. Since there are a great variety of wines, no particular brand is able to gain a big market share. As a result, the significant topics concerning channel building for imported grape wine are as follows: deciding on products that match well with the market prices in China, creating reasonable amount of channel profits, and choosing local agents that are committed to a single brand of grape wine.
 (5) Market input: China’s grape wine market is an emerging one, and it has its own path of development. Due to complicated channel building and fierce competition, foreign wine producers must be able to spare sufficient money for future market expenses. Otherwise, no local agent will be willing to pay for an unknown future brand of yours and expect to be repaid later. Although some big grape wine agents may opt for base prices and then pay huge market expenses through extremely high price markup ratio, yet they act as the agents for too many products, which means that the possibility that they devote much time and energy to your brand is slim. So if you want to get the market position and market share that you desire, rely on yourself.